Jade, Opium and Conflict: State-building in Northeastern Myanmar

Growing opium or food insecurity — that is the decision that thousands of poor farmers have to make in the northeast of Myanmar, an area where low levels of government investment has pushed its inhabitants to this illicit activity. As U Toe Maung says, “Poppy profits represent our only income. I know people say opium farmers are bad, and I understand why they say that. But with the rains the way they are, what else can we grow? You can dig down 2000 feet without finding water.” In the Shan State alone, there are more than 200,000 households involved in the illegal cultivation of poppy, which takes place in 49 out of the 55 townships of the region.

Despite high levels of poverty — 28.6% in the Kachin and 37.4% in the Shan State — the area is rich in natural resources. Along with opium, there is another important economic sector in the region: jade. The exploitation of both resources is a self-reinforcing process. On the one hand, the discovery of this gemstone boosted opium trafficking since the exploitation of this mineral created a market for drugs among the exhausted mining laborers. On the other hand, a high amount of the profits from opium have been invested in the mining and jade trades. However, local farmers and mining workers are not the ones reaping the profits. The Burmese Army, commonly known as the Tatmadaw, and insurgent groups who are locked in a constant battle for independence, are the ones who control the exploitation of resources.

These two phenomena, jade trade and opium trafficking, have transformed the Kachin and Shan insurgency from fighting for political independence to battling for natural resources. At the beginning, the military apparatus was based on the profits from plundering these resources. As a consequence of this shift, both the army and the rebel groups are benefitting from the production of drugs and the jade trade, but an end to this war is nowhere in sight.

A History of Conflict and Money

In 1947, the Panglong Agreement guaranteed the independence of Myanmar from the United Kingdom as a unified state. However, ethnic differences soon led to the emergence of separatist groups. Many ethnic minorities campaigned for self-determination, especially in Kachin state, a largely Christian area, and in Shan state, a multi-ethnic area. In 1960, the Kachin Independence Organization was established, and one year later its armed wing, the Kachin Independence Army (KIA), was founded with the goal of resisting the national government. Several insurgency groups emerged in Shan State during the 1960s, but the most powerful one established was the Shan State Army. Clashes with the Tatmadaw and the popular militias continued until the signing of ceasefires at the end of the century in 1989 and 1995. As part of these ceasefires, the leaders of the ethnic armed organizations (EAOs) “were co-opted into new patronage networks that allowed insurgent groups to control some territory and natural resources in exchange for their loyalty.”

During this period, Kachin and Shan States’ economies were based on the jade trade with China and narco-trafficking. The lack of government investment in these rural areas allowed the farmers to grow poppy seeds. The income that opium generated for growers generated economic opportunity while also offering the means to pay protection fees to the different armed groups. Burma became the world’s second largest producer of opium, and both insurgency groups and the army took advantage of this illicit network.

The surge in jade trade also increased interest in these areas, attracting many Chinese investors. Surprisingly, the exploitation of this mineral created a market for drugs among mining laborers: 4 out of 5 workers are now habitual drug users. But drug addiction also spread to urban areas, and some organizations claim that the government is involved in the distribution of opium among the local population as a tool for ethnic cleansing and for weakening the ethnic insurgency.

The relationship between the drug trade and armed conflict has its origins in the invasion of the Chinese Kuomintang Army in 1949. The group established control over the transportation of opium to heroin processing labs in Laos and Thailand. “This hub of opium cultivation and drug processing” that includes northeast Myanmar, western Laos, and northern Thailand is known as the infamous “Golden Triangle.”Since that moment, the illicit trade of drugs has been used by the Burmese Army as a way to finance the local paramilitary forces that perform counterinsurgency tasks. These militant groups are deployed to protect development projects across Shan and Kachin States and to seize land from farmers for large-scale agricultural projects. However, these groups are not paid directly by the government of Myanmar, but instead have been granted the ability to tax poppy farmers and sell drugs with impunity. Using this transactional method, the Tatmadaw can deny any relationships with the drug trade and commanders can distance themselves from illicit markets without pushing this lucrative industry back into the hands of rival insurgent groups.

In the same way, the illicit jade trade has been used to finance Myanmar’s armed forces as well as the rebel groups. A huge amount of jade-related money is funneled through opaque channels controlled by well-connected business elites. The commercialization of this gemstone usually takes place in a remote, ungoverned areas, where business is synonym for corruption. Most of the mining licenses go to mining companies controlled by relatives of politically influential generals. However, in some areas, Chinese investors finance big mining projects, controlled by the Tatmadaw and the KIA. Both groups have been known to support their military operations with jade profits in Kachin state.

Recent Developments

In 2008, the State Peace and Development Council, the military government, introduced a new constitution and political reforms, delivering certain insurgency-controlled areas more autonomy. Likewise, a new institution was created: The Border Guard Forces (BGF). It consisted of former insurgent groups who engaged in peace talks and who could join the Tatmadaw as a new subdivision. President Thein Sein stated that it was necessary to “make the ethnic issue a national priority,” offering an open dialogue between the government and insurgent groups. These reforms aimed to direct the whole country towards reconciliation, liberal democracy, and a mixed economy. However, clashes between the armed groups continued.

Some of the ceasefires signed during the 1990’s broke down when EAOs perceived the Burmese Army to be competing with them for control over local resources. The Tatmadaw began to re-route foreign direct investments through military-state channels and launched new military offensives. In 2012, a new agreement with insurgency groups from the south of Shan State was signed with the Restoration Council of Shan State and Shan State Progressive Party, providing the Tatmadaw the ability to concentrate its attacks in the north of the state. In 2015, the Nationwide Ceasefire Agreement was reached between eight insurgent groups and the government. The KIA refused to join, and it maintains that the negotiating platform is biased against minority groups. Instead, KIA created an alternative dialogue structure with six other EAOs called the Federal Political Negotiation and Consultative Committee (FPNCC). It is dominated by the United Wa State Army (UWSA), often seen as a vehicle for China to gain leverage over the country’s peace process.

In recent years, China has developed into an important player in the conflict. Kachin and Shan States’ economies have become closely linked with that of southwest China. Chinese investors have founded large plantations, wildlife trades, hydropower and jade mining projects in these regions. Additionally, large volumes of drug contraband are moved along highways and across major border crossings. Beijing also desires to remain on good terms with the Kachin State as they share ethnic commonalities with minorities on the Chinese side of the border. At the same time, China desires good relations with Myanmar since Xi Jinping has signaled his country’s interest in energy projects and resources in Myanmar.

In 2016, the first non-military President since the military coup of 1962 was elected and Aung San Suu Kyi assumed the role of State Counsellor. Despite these important shifts towards democratization, human rights violations remain commonplace in the northeastern regions of the country. Both the government and the EAOs have recruited child soldiers, deployed landmines, and have committed rape and torture against civilians and unnarmed combatants.

An Uncertain Future

As fortunes of traffickers grow, the underlying conflicts of ethnic tension and illicit drug networks will become more difficult to resolve. Suu Kyi’s success depends on her relationship with Myanmar’s still-powerful military, which controls the security forces, a quarter of the seats in Parliament, and key ministries and industries. It remains unlikely that Suu Kyi’s government will push the issue of jade exploitation and opium trafficking anytime soon. However, the evolution of these conflicts will determine the power relations in Southeast Asia and affect the world economy. Myanmar is the world’s second-largest producer of opium, and the stabilization of this area could reduce the amount of drug trafficking worldwide. Likewise, the control of the northeastern region of Myanmar could determine the management of the global jade trade in the future. Furthermore, there is high geopolitical risk since Myanmar is situated between two economic giants: China and India. Any serious conflict along the border of these countries could affect both regional markets and the international economy.

There are two possible solutions: an integrated approach of Myanmar’s government in order to control drug and jade networks, or a major Chinese intervention in the conflict areas. The later is the most possible one: the China-Myanmar Economic Corridor (CMEC) was signed last year, and it will pull Myanmar, and Shan State in particular, further into China’s orbit. More jade and opium will likely be exported to the neighbouring country in the short-term, but in the long-term, there will likely be a reduction of illicit trade since lucrative opportunities will emerge in the formal economy as more Chinese capital is invested in the area.

The other possible solution is an integrated approach by the national government, which will likely involve offering greater autonomy for ethnic insurgents and stronger measures against drug and jade networks and reform in the militia forces. Continuous dialogue between Myanmar’s government and ethnic insurgency leaders could lead to more autonomy for the Kachin and Shan state, reducing tension among the groups. Redoubling drug and jade control efforts and refocusing on organised crime and corruption associated with the trade could deliver change in the conflict. Increasing regulation over jade exploitation and trade could also lower the amount of this gemstone sold in the black market. Reforming militias and pro-government paramilitary forces, followed by a disbanding of all non-state military groups, could be a step towards a peace settlement. Finally, an investigation within the military to end drug and jade-related corruption could formally put an end to these kinds of activities.

The conflict in northeast Myanmar is one of the oldest ongoing wars in the world. Hundreds of thousands of people have been displaced and exploited, and thousands more have been killed. Environmental degradation from jade mining and opium mono-crops has negatively impacted the livelihoods of the local population. The consequences of the war, along with the narco-trafficking and the illegal jade trade, are horrific and long-lasting. An uncertain future awaits for the inhabitants of this region, who simply want peace and economic development far from the illegal activities of strong, powerful interests.